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How your home insurance can vanish overnight

Kat Zeman - Last updated: April 30, 2010

It can happen unexpectedly. Maybe you took an extended vacation. Perhaps you placed your home on the market and moved into a new one. Or maybe you’ve gone into a nursing home temporarily. If you’ve moved out of your home for any reason – including renovation – your home insurance policy may have moved out, too.

Unfortunately, a common clause in home insurance policies says that coverage is void on vacant homes – and you probably won’t realize your home insurance has vanished until it’s too late.

Most home insurance companies will give you a timeframe for how long your house can be vacant before coverage vanishes. According to the Insurance Information Institute (III), most insurers discontinue coverage on a home if it’s unoccupied for over 30 days. Some may allow up to 60 days.

What’s the deal? Insurance companies label vacant homes as high risk. Unoccupied homes are more likely to become victims of theft, vandalism, fire and water damage.

“Having no one in the house can leave potential problems undetected for a long period of time,” says Michael Barry, spokesperson for the Insurance Information Institute. “Who knows when someone will report a leak in the basement or the electrical problem that can lead to a fire and, depending on the neighborhood, there’s the potential for squatters.”

Before you vacate your home, take a good look at your insurance policy and ask your agent for guidance. Some insurance companies will grant you a “vacancy permit,” provided it’s requested before the vacancy goes into effect. However, the permit does not cover the same perils as your home insurance policy. According to III, it will cover perils such as fire and wind but not theft, vandalism or water damage. Vacancy permits vary from company to company. Check with your agent for specifics.

Vacancy insurance

If you want to insure your vacant home against the same perils that your standard policy would cover, you’ll need to purchase “vacancy insurance.” This would include theft, burglary and vandalism.However, not all insurance companies sell it.

Foremost Insurance, which specializes in selling vacancy insurance, offers a policy that will cover you for fire, wind, and hail in addition to “vandalism and malicious mischief.” Upon request, the policy could also include liability coverage in the event someone is injured on your property. All policies vary by state.

Foremost often insures homes that are empty because they are for sale, being held in the name of an estate or under renovation. It accepts vacant homes valued up to $1 million and there is no restriction on the age of the home. Policies can be purchased on an annual basis and cancelled any time.

But vacancy insurance can be expensive – expect much higher than premiums than for a standard policy. Loretta Worters, spokesperson for III, says that you could pay 50 or 60 percent more for a policy on an unoccupied home as compared to a regular homeowners policy. However, you may be able to reduce your premium slightly by arranging for someone to check on your home regularly, she adds. The policy price will also depend on whether a home has a central alarm system, deadbolt locks and/or smoke detectors. Insurers also may assess whether a policyholder has winterized the home to protect plumbing fixtures from freezing temperatures, and how long the house will be vacant, she says.

Saving money by renting out

There may be a less expensive option to buying vacancy insurance. Tully Lehman, spokesperson for the Insurance Information Network of California, recommends that you consider renting out your home while you’re away. You will have to buy landlord policy that generally costs about 25 percent more than a standard home insurance policy because landlords need more coverage than a typical homeowner, according to III. But that’s still much less expensive than buying a vacancy policy – and you’re collecting rent.

How will your insurer know?

Insurance companies do not need to spy on you to determine if your home has been left vacant. In most cases, it will become obvious when you make the claim. For example, if your home was vandalized by squatters (who made it their own home for a few weeks), that will appear in a police report. You may tell your insurer that you’ve only been gone for 29 days (to allude the 30 day vacancy deadline), but if police question your neighbors who say you’ve been gone for months, you may find your claim denied – and policy terminated. It’s always best to be honest with your insurance company.

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